Vice President Joe Biden and House Speaker John Boehner applaud President Barack Obama on Capitol Hill.

Vice President Joe Biden and House Speaker John Boehner applaud President Barack Obama on Capitol Hill.

Photo: Associated Press, J. Scott Applewhite

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President Barack Obama hugs outgoing Arizona Rep. Gabrielle Giffords, who was seriously wounded in a shooting last year.

President Barack Obama hugs outgoing Arizona Rep. Gabrielle Giffords, who was seriously wounded in a shooting last year.

Photo: AFP / Getty Images, Mandel Ngan

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Obama makes pitch to middle class in State of the Union speech

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WASHINGTON — Drawing a stark division between middle-class America seeking a “fair shake” and wealthy interests seeking to game the capitalist system, President Barack Obama told the nation Tuesday that the struggle to keep the American Dream alive is “the defining issue of our time.”

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by — or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules,” the president said during a feisty State of the Union address.

Obama's annual report to Congress was designed by the White House to set the tone for the 2012 congressional session and the president's re-election campaign.

Ratcheting up the populist rhetoric he started in an economic speech last month in Osawatomie, Kan., Obama offered a list of legislative proposals, including tax breaks for recession-ravaged families, tax incentives for small businesses to hire new workers and tax cuts for companies that move jobs back from overseas to the U.S..

He combined those with a new minimum tax payment for millionaires, expiration of the Bush tax cuts on upper-income Americans and elimination of oil industry tax incentives.

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“Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same,” he said in a 65-minute speech interrupted about 80 times for applause. “It's time to apply the same rules from top to bottom: No bailouts, no handouts and no copouts. An America built to last insists on responsibility from everybody.”

Obama's hard-edged populism underscored the vast ideological chasm that separates the two parties.

The president portrayed his vision for the future as one of fairness and prosperity for all. Republicans portrayed the Democratic incumbent's worldview as one of extremism, divisiveness and class envy.

“No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others,” Indiana Gov. Mitch Daniels declared in the official Republican response.

“As Republicans, our first concern is for those waiting tonight to begin or resume the climb up life's ladder. We do not accept that ours will ever be a nation of haves and have-nots. We must always be a nation of haves and soon-to-haves.”

Republicans also tried to reach out to Democratic-leaning Latino voters by offering up a Spanish-language rebuttal to Obama's speech delivered by Francisco “Quico” Canseco, a freshman congressman from San Antonio.

“The president did not cause our fiscal crisis, but he was elected on a promise to fix it,” Canseco said. “He has not made good on that promise over the last three years.”

Obama's new proposals have little chance of winning passage in a hyperpartisan Republican-controlled House of Representatives or a dysfunctional Democratic-controlled Senate. And while the president promised to “work with anyone in this chamber” to achieve common goals, he threatened to highlight Washington gridlock in the year ahead.

“I intend to fight obstructionism with action,” he pledged, “and I will oppose any effort to return to the very same policies that brought on this economic crisis.”

The speech fit comfortably into the Democratic Party's emerging political game plan for 2012. Obama blamed “election-year politics” for delaying comprehensive immigration reform and asked Congress to create a pathway to citizenship for young people illegally brought into the U.S. by their parents.

The president also delivered red meat to his party's environmental base by condemning federal tax subsidies for oil companies while pushing for more federal subsidies for alternative energy — despite the scandal over administration loan guarantees to Solyndra, a bankrupt California energy start-up.

“It's time to end the taxpayer giveaways to an industry that rarely has been more profitable,” he said, “and double down on a clean energy industry that's never been more promising.”

Obama pointed to hydraulic fracturing as a model for green energy funding, noting that the exploration technology was developed “over the course of 30 years” with the help of “public research dollars.”

Texas Sen. John Cornyn, chairman of the Senate Republicans' campaign committee, said Obama has “chosen to divide America” by delivering a speech “calculated to gain advantage in the election.”

But Houston Democrat Sheila Jackson Lee praised Obama's speech as “a blueprint for an economy that is built to last — an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.”

At the Capitol, the presidential politics extended to the gallery areas reserved for guests of the first lady and House speaker.

First lady Michelle Obama's guests included Debbie Bosanek, the secretary to Omaha investor Warren Buffett, who famously pays a higher tax rate than her boss. Obama renewed his push to enact the “Buffett Rule,” which would bring investment taxation levels into line with income taxation levels.

Another guest of the first lady, San Antonio Mayor Julián Castro, was picked to highlight the administration's commitment to one of the nation's largest solar energy projects, one that could create 800 jobs and $100 million in capital investment.

In a rare nod to bipartisan unity, lawmakers gave a standing ovation for Arizona Rep. Gabrielle Giffords, who announced her resignation Monday a year after being wounded in a shooting rampage. Giffords received an extended standing ovation when she entered the chamber.

Her husband, retired astronaut Mark Kelly, watched from his seat beside the first lady.